The diversification dance

Currently, the U.K. nursery stock sector is facing a convergence of three major pressures: inflation, labour shortages and increased regulatory requirements. Confronted with these persistent economic challenges, many land-based organizations implement a diversification strategy to create sustainable profits.

Growers are turning to diversification — seeking out new business opportunities to help offset a decline in sales and profits. This approach is rooted in the work of Igor Ansoff, a renowned strategist best known for the Ansoff Matrix. This matrix maps out growth strategies including market penetration, product development, market development and diversification. Here, diversification has two applications; related diversification, which leverages existing production or marketing capabilities to introduce new products or markets, and unrelated diversification, which moves the business into entirely new sectors outside current operations.

Related diversification has long been a strategy implemented by U.K. nursery owners, typically involving use of current production facilities to grow new crops outside a core range. For example, many annual (seasonal) basket/tub plant producers have added a range of perennial plants, such as Heuchera, Tiarella and Ajuga, into their product mix, due to a decline in the popularity of classic annual basket plants. This is a simple form of related diversification and carries less risk.

An outstanding example of related diversification is the Bridge Farm Group who operate a 60-acre production facility. What began as a traditional bedding plant nursery has been transformed since the company pursued a deliberate strategy of related diversification. New product categories now include culinary herbs, cut tulips, and most recently, cannabinoid extraction and plant-derived molecules for pharmaceutical and nutraceutical markets. For U.S. growers facing similar pressures to U.K. nursery owners, Bridge Farm’s trajectory illustrates how diversification — whether into new ornamental categories or entirely novel sectors like cannabinoids — can transform a business model without abandoning core production capabilities.

Diversification has two applications; related diversification, which leverages existing production or marketing capabilities to introduce new products or markets, and unrelated diversification, which moves the business into entirely new sectors outside current operations.

Related diversification carries less risk than unrelated diversification — a strategy frequently adopted by many U.K. farmers, who have pursued unrelated diversification by converting barns into event spaces, offices, or business parks to generate alternative revenue streams. While this type of diversification is relatively common across the wider U.K. agricultural sector, it remains less common in the nursery stock sector, where growers typically favour lower-risk, crop-related diversification or by expanding into online or bricks and mortar plant focused retail operations.

One notable exception however, is Paul van Leeuwen who was able to diversify his wholesale production of traditional nursery crops after a gas pipeline was installed through his site. The resulting compensation enabled the business to move from pure production to establish Greenacres Garden Centre, representing a move into general retail and food sale — a strategy sitting between related and unrelated diversification.

Drawing from how general U.K. farmers have diversified, a plant nursery could theoretically diversify in numerous ways. Glasshouses could be converted to an e-commerce fulfilment — a strategy for example developed by the leading online retailer, YouGarden who bought Kingfisher Nurseries, a significant U.K. Calluna and Erica grower. Following the acquisition, the site became YouGarden’s main center of operations for plant care, packing, and fulfilment.

Of course, glasshouses could also be converted into exhibition space, wedding venues or used to host corporate events. Likewise redundant or little used buildings on a nursery could be converted into small business units, enabling a passive income. As well as being growers, nursery owners can develop a successful income stream by becoming landlords.

Regardless of whether a grower pursues related or unrelated diversification, several key elements are required to ensure success. First, of course, is thorough market research — essential to validate demand and identify realistic revenue projections before committing capital. Second, financial planning must account for upfront investment costs, ongoing operating expenses and a realistic timeline to profitability. Diversification rarely pays off immediately.

Third, access to the right skills and expertise is critical. Moving into a new product or service often requires knowledge not currently present within the business, whether through new hires, partnerships or external advice. Fourth, operational integration should be carefully managed so that the new venture does not cannibalize or distract from the core nursery business.

Finally, a clear risk management strategy — including phased rollout, pilot schemes, or maintaining a strong core business — helps protect the grower against unforeseen challenges. When these elements are in place, diversification becomes a calculated investment in creating a sustainably profitable business.

Neville Stein is a horticultural business consultant with nearly five decades of experience. His clients include the Royal Botanic Gardens, Kew, The Royal Horticultural Society, The Horticultural Trades Association, Longwood Gardens and many privately-owned nursery businesses